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A Turkish-Iranian gold trader has told a Manhattan Federal court that he bribed a former Turkish government official to set up a deal aimed at helping Iran evade US sanctions.

Reza Zarrab who has already pleaded guilty took the witness stand on the the first day of his evidence in a trial of a top executive at Turkey'a state-owned Halkbank.

The whole sanctions-busting scheme is set to further inflame US Turkish relations.

Zarrab's decision to cooperate has also raised speculation that his evidence could incriminate senior Turkish officials including prominent members of today's Turkish government.

Its claimed Zarrab agreed back in 2012 to share his profits from the deal with Zafer Caglayan who was at the time was Turkey's economy minister.

It's alleged Zarrab paid him more than 50 million dollars in bribes in exchange for a deal with Halkbank to help Iran use its money abroad through gold transactions.

Various other politicians including Egemen Bagis, a former EU minister, according to Zarrab allegedly helped smooth the way at several other Turkish banks.

It is unclear if Turkish President Recep Tayyip Erdogan knew what was going on although he is not accused of any wrong doing. However his government has said the whole case has been fabricated for political motives.